AB readers have had to endure some of my recent frustrations with certain statements on this topic from people who only pretend to understand economics. Which is why I bring you some insights from Paul Krugman:
But the US is an “open economy” — we do a lot of trade with the rest of the world — and there’s another important channel for monetary policy: low interest rates tend to cause a low dollar, which is good for net exports. In fact, the decline in the non-oil trade deficit is one of the few bright spots in the US economic picture. So the second panel in the graphic doesn’t show a failure of policy — it shows the one area in which monetary policy is working! In fact, if a weak dollar wasn’t helping net exports, we’d be in much worse shape than we are.
All that is left to say is: Thank You!
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